Punitive insurance premiums for electric cars are hitting lower paid workers hardest and preventing them from breaking into the EV market, Andrew Leech, MD and founder of Fleet Evolution has observed.
Fleet Evolution has seen insurance rates increase by between 150% and 300% for electric cars in recent months, based on what the company believes is now outdated research and uncompetitive insurer attitudes towards EV running costs.
At the same time, Fleet Evolution says that, based on a sample of 1,000 cars from its own fleet, it has seen a 40% reduction in accident rates involving EVs over the last two years.
“The two things simply don’t add up,” said Leech. “We are seeing falling accident rates involving EVs, even though there are far more of them on the road, while at the same time, insurance rates are going through the roof.
“EVs were typically more high-powered and running costs were higher several years ago. But, as more mainstream models are becoming available, so whole life costs are coming down – but we are not seeing insurance rates reflect that fact by coming into line with mainstream premiums or reducing as accident rates fall.”
Leech cited a younger colleague who switched from a diesel-engined Volkswagen Golf hatchback to an ID.3 – the current electric equivalent – and was quoted a £900 insurance premium, compared to her existing £350 premium.
And the new Audi e-tron he has just had delivered comes with an insurance premium of £1,400 with a £1,000 excess from an insurer normally rated at the lower cost end of the market. “And that’s a for a 50-year-old man with a clean driving licence and maximum no claims bonus,” he said.
Leech believes that insurers are basing higher rates on perceived higher and historic SMR costs for EVs, although with fewer working parts, the reverse in reality is true.
“If you look at Tesla, currently the most popular EV brand, historically the cars had to go back to the States for repair. Now, that’s no longer the case as there are over 30 Tesla service centres in the UK. But we don’t believe that’s being reflected in the insurance costs,” he said.
In addition, the fact that many EVs have sophisticated specification including Advanced Driver Assistance Systems (ADAS) including Autonomous Emergency Braking, Adaptive Cruise Control and Lane Departure Warning have led to many EVs being safer than the ICE models they replace, with fewer accidents.
“Previously, a driver may have had a collision through lack of awareness or being distracted. Now the current ADAS means that such incidents are far less likely,” said Leech.
Leech believes that the lowest paid, often younger workers are being hit hardest by the rising insurance rates as the higher rates potentially take them below the National Minimum Wage threshold, which then makes them ineligible for salary sacrifice vehicles.
“Ironically, the people who would probably benefit most from having a low tax, low cost EV are often prevented from taking them due to the prohibitive and punitive insurance costs,” he said.
“There is little doubt in our minds that these current unrealistic and excessive insurance rates are acting as a barrier to wider EV uptake,” he added.